Ryanair Said to Sign Accord With China to Work on Comac Jet

By Andrea Rothman and Steven Rothwell -
Jun 17, 2011

Ryanair Holdings Plc (RYA), the second-
biggest buyer of Boeing Co. (BA) jets, plans to work with China on
the C919 plane that the country is designing to challenge the
U.S. manufacturer and its rival Airbus SAS in the single-aisle
market, a person with direct knowledge of the talks said.

Ryanair Chief Executive Officer Michael O’Leary will
announce the plan at a press briefing organized by Commercial
Aircraft Corp. of China next week at the Paris Air Show, said
the person, who spoke on condition of anonymity because the
negotiations remain confidential. The accord would make the
Dublin-based budget carrier a partner in defining design
elements such as the jet’s size and shape, the person said.

Comac, as the state-controlled company is known, plans test
flights for the C919 in 2014, with entry into service by 2016.
The jet, which seats about 150 people, aims to pry open the
duopoly of Airbus and Boeing in the single-aisle market, the
largest part of the civil aviation industry. By teaming up with
Comac, Ryanair would potentially undermine Boeing as the U.S.
company weighs an upgrade of its 737 jet or an all-new plane.

‘Bluffing’

“The Chinese want to be part of the global aircraft
industry and I think a lot of airlines would welcome having
somebody else apart from Boeing and Airbus,” said Joe Gill, an
analyst at Bloxham Stockbrokers in Dublin. “But you’ll find
plenty of skeptics who’ll say Ryanair is bluffing, trying to up
the ante with Boeing until Boeing cracks.”

Ryanair said in 2009 it had pulled out of a deal to buy 200
additional 737s after failing to agree unspecified terms with
Boeing despite having settled on a price for the aircraft.

Airbus, based in Toulouse in southern France, has been
offering carriers a version of its A320 single-aisle plane with
new engines, slated for service at the end of 2015. The company
has picked up more than 400 firm orders or commitments for the
aircraft since announcing the plan at the end of 2010.

Comac said in March it expected 50 to 100 orders this year
for the C919, the nation’s first passenger jet. The aircraft
will be as much as 15 percent more fuel-efficient than existing
narrowbodies, Chen Jin, general manager for sales and marketing,
said at the time.

As of March 31, Ryanair had 272 Boeing 737-800s in its
fleet, with firm orders for an additional 40. That makes the
Irish carrier the model’s No. 2 operator after Southwest
Airlines Co., which has 553, according to research firm Ascend.

Exploring Options

Ryanair is “in conversation” with planemakers about its
fleet plans and those talks include Chinese and Russian
manufacturers, as well as Boeing and Airbus, Chief Operating
Officer Michael Cawley said in an interview on Jan. 31, adding
that the carrier is “not wedded to any aircraft manufacturer.”

Stephen McNamara, a spokesman for Ryanair, declined to
comment on Comac today.

British Airways signed a memorandum of understanding with
Comac at the Farnborough Air Show in Britain last July, agreeing
to initiate talks about “future aircraft needs,” the unit of
International Consolidated Airlines Group SA confirmed today.

“Most airlines feel they are over a barrel when it comes to
dealing with Boeing or Airbus,” Bloxham’s Gill said. “They don’t
feel they have too many options. It’s a funny industry, where
you only have two players.”

Gill said in a note to investors yesterday that an order
from Ryanair, Europe’s biggest discount airline, would give the
C919 global legitimacy and be “one helluva a strategic play.”